Most Stocks Suffered 80%+ Declines Since the 1980s, Report Finds
A new report reveals a sobering reality for long-term investors: since the mid-1980s, the typical stock has experienced a peak-to-trough decline of more than 80%.
While many investors dream of having bought and held stocks like Apple, Microsoft, or Nvidia from their IPOs, few appreciate the extreme volatility that often accompanied their rise. Even the most successful companies endured painful drawdowns along the way.
In a study spanning nearly 40 years of market history, Michael Mauboussin and Dan Callahan of Morgan Stanley Investment Management analyzed over 6,500 publicly traded companies between 1985 and 2024. Their conclusion: massive losses are more common than most investors realize.
“The findings are provocative and surprising,” the authors noted.
They found:
- The median drawdown from peak to trough was 85%, excluding dividends and companies that went to zero.
- The average drawdown was 81%.
- The median recovery only brought the stock back to 90% of its former peak.
- 54% of stocks never fully recovered.
Even among stocks that did rebound, the results were skewed by a small number of outliers. The average stock eventually rose to 340% of its earlier peak, but this was largely driven by a handful of market leaders.
This aligns with findings from Hendrik Bessembinder of Arizona State University, who analyzed over 28,000 U.S. stocks between 1926 and 2024. He found that just 2% of companies generated 90% of the market’s $79.4 trillion in total wealth. The top six contributors — Apple, Microsoft, Nvidia, Alphabet, Amazon, and Exxon Mobil — accounted for $17.1 trillion of that total.
But even these giants weren’t immune to volatility. Amazon, for example, lost 95% of its value between late 1999 and 2001. On average, the top six wealth creators saw a maximum drawdown of 80.3%, right in line with the broader trend.
For stocks that fell more than 95%, only 16% ever recovered their peak value. However, for those that did survive and rebound, the median one-year total return after bottoming was nearly 300%, and annualized returns over the following decade exceeded 30% — though again, this excludes stocks that went to zero.
These numbers reinforce a key principle: diversification is essential. Even broad indexes like the S&P 500 have seen major drawdowns, such as during the dot-com crash and the 2008 financial crisis.
Mauboussin and Callahan opened their report with a quote from the late Charlie Munger, Warren Buffett’s longtime partner:
“It’s in the nature of long-term shareholding that the quoted value of your stock will decline by 50% — perhaps more than once — during your lifetime,” Munger said in a 2009 BBC interview. “If you’re not willing to react with equanimity to such drops, you’re not fit to be a shareholder.”
Munger passed away in November 2023, but his words remain relevant. For long-term investors, enduring volatility with discipline may be the price of capturing the market’s biggest gains.
